Written by Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO – Multi Asset, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
It was a mixed week for equity markets. The US was slightly positive, as company earnings proved resilient. However, investors remain concerned about interest rate rises following the robust jobs reports. Chinese markets were weaker following military exercises close to Taiwan. Oil moved lower, as stockpiles rose in the US.
Despite the recent slowdown in US economic growth and fears of a recession, the jobs market continues to exceed expectations. The government reported Friday that the economy added 528,000 jobs in July far exceeding most economists’ forecasts and unemployment slipped to 3.5% from 3.6%.
Following the US visit to Taiwan, which marked the highest profile visit by a US official in 25 years, Beijing has carried out military drills in waters near Taiwan on an unprecedented scale. In addition, China’s missile launches have underlined the risk to global supply chains from escalating tensions between Beijing and Taipei.
The annual producer inflation in the Euro area fell to 35.8% in June of 2022 from 36.2% in May, the lowest in four months. Prices slowed for energy and unfinished items. Producer prices measure the average change in the price of goods and services sold by manufacturers and producers in the market.
Last Thursday, the Bank of England (BoE) raised interest rates by 50 basis points to 1.75%, marking the biggest rate increase in 27 years. Additionally, the BoE downgraded the 2023 growth forecast from 0.2% to 1.4%, driven by the latest surge in gas prices, and forecasted an unemployment rate of over 6% by the end of 2025.
The price of oil fell below $90 per barrel for the first time since the Russia Ukraine war began in February. Oil was trading around $88 on Friday afternoon for an overall decline of nearly 10% for the week. Concerns are growing that a global economic slowdown prompted by higher interest rates will heavily impact fuel demand.
Shell and Lufthansa announced plans to enter a supply agreement for 1.8 million metric tons of sustainable aviation fuel (SAF), marking one of the largest commercial SAF deals to date. Under the terms of the potential agreement, Shell would supply as much as 594 million gallons to Lufthansa at airports around the globe. The deal would contribute to Shell’s ambition for at least 10% of its aviation fuel sales to come from SAF.
After a strong US jobs report last Friday, investors will eagerly watch the inflation report, which will be released on Wednesday. Signs that inflation remains strong despite easing commodity prices may further bolster the case for interest rate hikes. Elsewhere, China, Mexico, Brazil, and India are also set to release inflation data. Finally, Q2 GDP figures for the UK will be released on Friday.
Sources: Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO Multi Asset, Marlborough’s Multi Asset Investment team , T.Rowe Price, John Hancock, Morningstar, PIMCO, Trading Economics, and ESG Today.
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